PROGRAMME OF CONDITIONAL PLACEMENT of funds
THROUGH SECOND-TIER BANKS
BY DAMU ENTREPRENEURSHIP DEVELOPMENT FUND JSC
(STABILIZATION PROGRAMME – TRANCHE III)
1. GENERAL PROVISIONS
When used herein, the following terms shall have the following meanings:
“ Second-Tier Banks ” mean second-tier banks and financial organizations of the Republic of Kazakhstan pursuant to the laws of the Republic of Kazakhstan;
“Partner Banks” mean second-tier banks and financial organizations identified by the State Commission on Modernization of Kazakhstan’s Economy as participants of this Programme ;
“Internal Documents of the Fund” mean documents adopted by the Fund’s management bodies, i.e. sole shareholder (General Shareholder Meeting), Board of Directors and Management Board;
“SMB Entities” mean small and medium business entities as defined in accordance with the laws of the Republic of Kazakhstan;
“Conditional placement of funds” means financing of partner banks for subsequent on-lending to SMB entities;
“Fund” means «Damu Entrepreneurship Development Fund» Joint-Stock Company.
The Programme of Conditional Placement of Funds through Second-Tier Banks (hereinafter referred to as the Programme) is a tool of the government policy to provide financial support to SMB entities in the Republic of Kazakhstan.
The Programme shall be implemented through the Fund’s provision of financial resources (funding) to second-tier banks under preset (target-oriented and restrictive) conditions for subsequent onlending to SMB entities. At the same time, it is one of its main principles of cooperation with Partner Banks not to interfere with their internal procedures and credit process and Partner Banks’ full liability for decision-making risks .
The Programme has been developed to enhance the efficiency of government efforts in providing financial support to SMB entities and is based on public-private partnership principles.
Financing of SMB entities by Partner Banks under this Programme shall be provided without any restriction by types of activities other than activities prohibited by laws of the Republic of Kazakhstan.
Overcoming the credit crunch for SMB entities.
- lowering the cost of credit for the SMB entities;
- covering more SMB entities due to raising of private financial institutions’ funds;
- lowering the debt burden of SMB entities by refinancing their outstanding loans;
- enhancing access to and prompt provision of credit to SMB entities by using second-tier banks’ organizational and technical capacity .
2. PROCEDURE FOR PLACEMENT OF FUNDS WITH PARTNER BANKS
2.1. A list of partner banks and amounts to be placed with them shall be approved by the State Commission on Modernization of Kazakhstan’s Economy (hereinafter referred to as the State Commission).
2.2. Financial resources placed by the Fund with Partner Banks shall come from the Fund’s sole shareholder, Samruk-Kazyna National Welfare Fund , its subsidiaries/dependent companies and the Fund’s own resources.
2.3. Funds shall be placed on the basis of Master Agreements on Placement of Programme Funds between Samruk-Kazyna National Welfare Fund JSC, the Fund and Partner Banks (hereinafter referred to as the Agreement). At the same time, funds shall be allocated under individual Loan Agreements signed between the Fund and Partner Banks within the framework of Agreements.
Agreements shall contain indicative terms and conditions on funds placing (including the amount of funds to be placed), rights and duties of the Parties.
Loan Agreements shall contain the amount of funds to be placed, procedures for granting and repayment of placed funds and the repayment schedule.
3. TARGET GROUP
3.1. Legal Status of the Ultimate Borrower:
SMB entities registered under the laws of the Republic of Kazakhstan shall be ultimate recipients of financial resources under the conditional fund placement framework .
Loans extended to SMB entities shall be repayable at specified maturity, bear interest and be collateralized.
3.2 Purposes of Lending
Loans shall be extended to SMB entities towards purchasing new and upgrading existing capital assets as well as replenishing working capital and refinancing of outstanding loans of the SMB entities.
4. PARTICIPATION OF PARTNER BANKS
4.1. Terms and conditions of cooperation with Partner Banks shall be determined in accordance with the Agreement and corresponding Loan Agreements.
4.2. Conditions of Funds Placement by the Fund with Partner Banks:
· The Bank can provide its own resources for financing of SMB entities in an amount equal to 100% of the amount the Fund places with such Partner Bank over the Programme’s life;
· annual nominal interest rate for funds placed with Partner Banks (other than Kazkommertsbank and Halyk Savings Bank of Kazakhstan) shall depend on the share of Bank’s own resources used under the Programme:
Share of STB’s Own Funds as % of Placed Funds
Annual Nominal Interest Rate
Funds stipulated hereunder placed with Kazkommertsbank and Halyk Savings Bank of Kazakhstan shall be provided at an annual effective rate of 8% per annum.
· Tenor of placement with the Banks: up to 7 years (84 months).
· Deadline for disbursement of placed funds by Partner Banks: 01 July 2009. Partner Banks shall disburse the placed funds on the basis of the disbursement schedule including the following deadlines: till 01 April 2009, 01 May 2009, 01 June 2009 and 01 July 2009.
Within the limits of the placed funds, Partner Banks shall themselves determine the amounts to be disbursed by each deadline set by the disbursement schedule.
· Principal repayment: by equal semi-annual installments, subject to a grace period of up to 12 months. Should the Partner Bank provide a grace period for SMB entities exceeding 12 months, the grace period for the Partner Bank can be revised by the Management Board of the Fund;
· Interest payment: on a quarterly basis, to be accrued on the remaining principal amount.
4.3. Partner Banks shall bear all risks associated with the funds placed hereunder.
4.4. In case of untimely disbursement of placed funds by the Partner Banks the undisbursed part shall be revoked in favor of the Fund and be allocated, pro rata, among other Partner Banks, which disbursed the funds placed with them hereunder in full. The Partner Bank shall pay to the Fund a penalty equal to the refinancing rate of the National Bank of the Republic of Kazakhstan for an undisbursed amount of funds and for an actual period of use.
4.5. SMB entities cannot receive several Loans from different Partner Banks using the Fund’s resources hereunder and under any other Conditional Placement Programmes through STBs.
In the event of breach of this requirement Partner Banks shall repay the loan in accordance with provisions of the Bank Loan Agreement or replace the loan with their own funds by forwarding the Fund’s resources to other SMB entities compliant with the requirements of the Programme.
4.6. Partner Banks shall report to the Fund on the progress of disbursement of funds placed under the Programme . The procedure for, form and frequency of Partner Banks’ reporting shall be set out in the Agreement.
4.7. The Fund shall have a right to:
- inspect a Partner Bank's compliance with the requirements of the Agreement when extending loans to SMB entities;
-request any additional information on the financed projects;
- monitor, in collaboration with Partner Bank's representatives, projects including on-site visits. Monitoring frequency shall be set out in the Agreement.
4.8. Within the Programme, Partner Banks shall allocate, from the Fund’s resources and their own resources participating in the Programme, at least 50 and 30 bln. KZT for financing of SMB projects in Astana and Almaty respectively.
4.9. Partner Banks are recommended to spend at least 30% of the Fund’s resources and their own funds participating in the Programme towards financing of SMB projects implemented in the sector corresponding to Chapter 10 (Production of Food) other than 10.9 (Production of Ready Fodder) and Chapter 11 (Production of Drinks) of Section C (MANUFACTURING) of the General Classifier of Economic Activities GK RK 03-2007 approved by Order N 683-od dated December 14, 2007, of the Technical Regulation and Metrology Committee of the Ministry of the Industry and Trade of the Republic of Kazakhstan.
4.10. During the effectiveness period of the Agreements the funds released as a result of refinancing of SMB loans using the Fund’s resources should be utilized by the Partner Banks in the economy of the Republic of Kazakhstan.
4.11. In their Bank Loan Agreements/Line of Credit Agreements entered into with SMB entities Partner Banks should make a proviso regarding the consent of such SMB entities for the Partner Bank and the Fund to provide information on the loan(s) including that classified as banking and commercial secrets to the working group (body) established for monitoring of and control over intended, lawful and efficient use of funds allocated from the National Fund of the Republic of Kazakhstan and to state authorities and organizations within such working group.
At the request of the working group (body) established for monitoring of and control over intended, lawful and efficient use of funds allocated from the National Fund of the Republic of Kazakhstan and to state authorities and organizations within such working group Partner banks shall provide information on loan(s) granted hereunder including that classified as banking and commercial secrets.
5. SMBE LENDING CONDITIONS
5.1. Conditions for disbursement of the Funds resources:
· tenor: up to 84 months;
· annual effective interest rate for SMB entities: max. 12.5%;
· loan currency: KZT;
· refinancing of outstanding SMB loans, subject to 70% limit for the Fund’s resources;
· principal grace period: up to six (6) months for loans extended for replenishing working capital and up to twelve (12) months for loans extended for other purposes;
· SMB entity should start utilizing the Loan within 2 months since the date the Bank Loan Agreement/Line of Credit Agreement was entered into.
· other loan terms and conditions shall be determined by a Partner Bank itself.
5.2. Conditions for disbursement if STBs’ funds:
· annual effective interest rate for SMB entities: max. 12.5%;
· loan currency: KZT or a foreign currency;
· other loan terms and conditions shall be determined by the Partner Bank itself.
5.3. The financing cap per SMB entity hereunder (irrespective of funding sources) shall not exceed 750,000,000 KZT.
5.4. The total single borrower debt to a Partner Bank (total remaining loans) hereunder shall not exceed the approved limit/amount of 750,000,000 KZT.
5.5. The Bank shall not be allowed to extend unsecured loans to SMB entities;
5.6. It shall be forbidden to provide funding hereunder to borrowers with a negative credit history as determined by a Partner Bank’s internal rules.
5.7. The funds placed hereunder shall be deemed to be disbursed by Partner Banks:
§ if they are actually extended by the Partner Bank to finance SMB projects in accordance with the terms and conditions hereof;
§ if loanable funds are not provided by a Partner Bank under a Bank Loan Agreement/Line of Credit Agreement with SMB entities prior to the disbursement deadline established hereby. These loanable funds should be recorded at an off-balance-sheet account as a Partner Bank’s liability to SMB entities, with their availability period not to exceed 1 year since the Bank Loan Agreement/ Line of Credit Agreement has been entered into.